For years we’ve been told that the key to good financial health is saving, and that’s true… but only partly. Saving isn’t the same as stashing money away in a current account because when money is sitting idle for a long time, inflation quietly erodes its value. In other words, even though the balance doesn’t go down, over the years that money will buy us fewer things. Hence simply putting it aside and doing nothing with it isn’t really enough.
This is one of the most common mistakes, made especially by people who think they “don’t know anything about finances” and are unsure where to start. The good news is that you don’t need to be an expert or have large amounts of money to take the first steps; anyone can invest. To begin with, you should organise your income and expenses, set up a cushion for unforeseen events, and then consider the alternatives which are appropriate for your situation to ensure these savings don’t lose value over time. Investing is still a word that commands respect, often associated with large fortunes and complicated charts, yet it’s actually a tool for making money work for us and there are many ways to do it, not all of which involve high risks or large sums. The main thing is to get shot of the idea that “this isn’t for me” and start learning about it, because there are solutions for everyone. Always use reliable funds, seek advice from professionals in the industry and, most importantly, steer clear of products promising spectacular returns in a very short time.
One of the keys to investing with peace of mind is diversification, and diversifying simply means not putting all your eggs in one basket. Just as it’s not ideal for all our financial stability to come from a single source of income (which is why we talk about investing money so that it works for us), it’s not a good idea to cluster all your investment in one place. It’s essential to assess your risk profile and then look for the product that best suits your needs. There are highly diversified products which allow you to protect your capital, grow it sustainably and provide you with stability and peace of mind. The important thing is to be aware that there are products for every type of customer.
This is because financial peace of mind does not depend solely on how much you earn but also on how you plan and invest. Some people with very high incomes are constantly on edge while others with more modest incomes are able to sit back and feel in control. The difference is usually down to planning and habits. Knowing how much money is coming in, how much is going out, what percentage you invest and what your financial goals are allows you to make decisions which help you achieve financial wellbeing. Yet we haven’t been taught this, and now more than ever financial education is crucial because we’re living in a world of inflation, constant change and economic uncertainty. Grasping the basics means you can make more informed decisions and not be swayed by fear or doom-laden headlines.
This education is essential at any age, albeit our priorities shift over time. At 20, we tend to prioritise independence; at 30, stability; and from 40 onwards, protecting our future. However, the sooner we embrace these ideas, the better our lives will be. Financial education for children deserves special attention; it can start with something as simple as teaching them to save for a goal and talking about money naturally. The sooner they are aware of the impact it has on their lives, the better.
At the end of the day, personal finance isn’t about magic formulas but rather knowledge, habits and thoughtful decisions. The sooner we start to understand it, the more peace of mind we’ll have.